SAN FRANCISCO (AFX) -- Intel Corp. on Friday slashed its first-quarter sales forecast by half a billion dollars, as the world's largest chipmaker faces slowing growth in computer sales and stiffer competition from smaller rival Advanced Micro Devices Inc.
Intel said it expects revenue of $8.7 billion to $9.1 billion for the current quarter. The midpoint of that range is $500 million less than that of Intel's prior forecast for sales of $9.1 billion to $9.7 billion.
Analysts polled by Thomson First Call expected Intel to post sales of $9.42 billion in the March period.
On Wall Street, investor reaction was muted as Intel shares fell 17 cents to $20.32. AMD was off $1.82, or 4.4%, at $39.51.
Intel's chips power about 80% of the world's PCs, but growth in that market is slowing as it matures. At the same time, AMD has gained share in the overall chip market, especially processors used in corporate servers after it beat its larger rival to market with a key technology.
Santa Clara, Calif.-based Intel has lowered prices to help it regain share. That strategy likely contributed to the shortfall, according to Goldman Sachs analyst James Covello, who suggested investors should wait to buy Intel shares.
'Investors will increasingly question Intel's franchise value until/unless their pricing strategy begins to slow down AMD's momentum,' Covello wrote in a note to clients.
Toby Crabtree, portfolio manager at Leeb Capital Management, which has boosted its Intel stock position the past month, thinks Intel's manufacturing power will allow it to gain the upper hand.
'Ultimately Intel's manufacturing strength will allow it to control pricing in the sector. And put the pressure on AMD,' Crabtree said. 'We're going to stay with the stock.'
In a printed statement, Intel attributed its revenue shortfall to weaker-than-expected demand and a 'slight market-segment share loss.'
Recent reports from several technology research firms show that AMD boosted its share of the market for PC and corporate server chips in 2005.
AMD's worldwide market share for PC and server chips rose to 18.2% in 2005 from 15.8% in 2004, according to preliminary data from Mercury Research.
As part of its 2006 product roadmap, Intel is rolling out new chips it hopes will help it take back the market share it lost. It has been hurt by a delay for a new server chip that utilizes two processing engines on a single chip. It is expected to start selling sometime in the second quarter.
Intel also said its first-quarter gross margin -- a key indicator of profitability for chip companies -- will be hurt by the lower revenue view. Expenses, meanwhile, should be lower than forecast due to the lower spending stemming from weaker demand.
Over the past month, a few Wall Street analysts expressed concern that Intel may be weighed down by rising inventory and aggressive pricing. Last week, ThinkEquity Partners cut Intel to sell. On Friday, Caris & Company cut the chipmaker to sell as well.
Of the 45 analysts that cover Intel, five have sell ratings. The others are Prudential Equity Group, First Albany, and Jyske Bank, according to Thomson First Call. This story was supplied by MarketWatch. For further information see www.marketwatch.com.
Intel said it expects revenue of $8.7 billion to $9.1 billion for the current quarter. The midpoint of that range is $500 million less than that of Intel's prior forecast for sales of $9.1 billion to $9.7 billion.
Analysts polled by Thomson First Call expected Intel to post sales of $9.42 billion in the March period.
On Wall Street, investor reaction was muted as Intel shares fell 17 cents to $20.32. AMD was off $1.82, or 4.4%, at $39.51.
Intel's chips power about 80% of the world's PCs, but growth in that market is slowing as it matures. At the same time, AMD has gained share in the overall chip market, especially processors used in corporate servers after it beat its larger rival to market with a key technology.
Santa Clara, Calif.-based Intel has lowered prices to help it regain share. That strategy likely contributed to the shortfall, according to Goldman Sachs analyst James Covello, who suggested investors should wait to buy Intel shares.
'Investors will increasingly question Intel's franchise value until/unless their pricing strategy begins to slow down AMD's momentum,' Covello wrote in a note to clients.
Toby Crabtree, portfolio manager at Leeb Capital Management, which has boosted its Intel stock position the past month, thinks Intel's manufacturing power will allow it to gain the upper hand.
'Ultimately Intel's manufacturing strength will allow it to control pricing in the sector. And put the pressure on AMD,' Crabtree said. 'We're going to stay with the stock.'
In a printed statement, Intel attributed its revenue shortfall to weaker-than-expected demand and a 'slight market-segment share loss.'
Recent reports from several technology research firms show that AMD boosted its share of the market for PC and corporate server chips in 2005.
AMD's worldwide market share for PC and server chips rose to 18.2% in 2005 from 15.8% in 2004, according to preliminary data from Mercury Research.
As part of its 2006 product roadmap, Intel is rolling out new chips it hopes will help it take back the market share it lost. It has been hurt by a delay for a new server chip that utilizes two processing engines on a single chip. It is expected to start selling sometime in the second quarter.
Intel also said its first-quarter gross margin -- a key indicator of profitability for chip companies -- will be hurt by the lower revenue view. Expenses, meanwhile, should be lower than forecast due to the lower spending stemming from weaker demand.
Over the past month, a few Wall Street analysts expressed concern that Intel may be weighed down by rising inventory and aggressive pricing. Last week, ThinkEquity Partners cut Intel to sell. On Friday, Caris & Company cut the chipmaker to sell as well.
Of the 45 analysts that cover Intel, five have sell ratings. The others are Prudential Equity Group, First Albany, and Jyske Bank, according to Thomson First Call. This story was supplied by MarketWatch. For further information see www.marketwatch.com.